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Markets' wild ride continues

North American stock markets chalked up huge rallies late in the afternoon today, resulting in one of the biggest one-day gains ever for the Dow Jones industrial average and a big bounce in Toronto

By Malcolm MorrisonTHE CANADIAN PRESS

Tues., Oct. 28, 2008

North American stock markets chalked up huge rallies late in the afternoon today, resulting in one of the biggest one-day gains ever for the Dow Jones industrial average and a big bounce in Toronto

Toronto's S&P/TSX composite index rose 614.29 points or 7.2 per cent to close at 9,151.63.

That mended a good chunk of the 757-point hole dug in Toronto on Monday, when growing worries about the length and depth of a global recession pushed down Canada's main index by eight per cent.

In New York, the Dow gained 889.35 points today to rise almost 11 per cent to 9,065.12 – the second-biggest percentage gain on record for the world's most-watched stock-market indicator.

Today's rallies follow a series of market declines over the past weeks that have shocked even experienced market professionals and lowered Toronto's benchmark index to levels not seen in four years.

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The speed and depth of the decline has forced some large-scale investors, such as hedge funds, to sell some of their most desirable holdings to repay borrowed money or meet other obligations.

"We're witnessing what I would say is a massive global margin call," John Stephenson, portfolio manager at First Asset Funds Inc., said.

"It's going to continue to be volatile for the next day or two because we're coming to the month end, and that's when a lot of mutual fund companies have Oct. 31 as their yearend. I think the volatility is going to be high for a day and maybe even tomorrow."

Investors fled from mutual funds last month, leaving the Canadian industry with net redemptions of almost $4.5 billion – the most of any month on record.

The TSX Venture Exchange added 7.95 points to 816.94.

The Canadian dollar was up 0.37 cent to 77.96 cents US, still at depths not seen in about four years, because of weak commodity prices, economic uncertainty and a resurgent American currency. The loonie is down about 18 per cent since the start of October.

New York's Nasdaq composite index gained 143.57 points or 9.5 per cent to 1,649.47, while the S&P 500 index advanced 91.59 points or 10.8 per cent to 940.51 as the U.S. Conference Board said its index of consumer confidence has fallen to 38 during October, well below the reading of 51 analysts expected and the lowest reading in 41 years.

Consumers surveyed by the research group expected labour and business conditions to worsen considerably going in the months ahead.

"Obviously, the U.S. consumer is waking up and saying, hey, things aren't so good, I might lose my job – it's clear we're in a global recession," Stephenson added.

Among the bad news on the jobs front today, appliance giant Whirlpool Corp. said it will cut about 5,000 jobs by the end of 2009 while Toronto-based mining company Breakwater Resources Ltd.(TSX: BWR) announced plans to suspend operations at two Canadian mines, resulting in an undetermined number of layoffs.

There was also grim news from the U.S. housing sector. The Standard & Poor's/Case-Shiller 20-city housing index dropped a record 16.6 per cent in August from a year ago.

Iceland said it needs US$6 billion as it raised its key interest rate by six percentage points to 18 per cent. Germany said Pakistan needs a loan from the International Monetary Fund within a week.

Iceland's problems have sunk plans to take one of Canada's biggest seafood companies private. Clearwater Seafoods Income Fund (TSX: CLR.UN) said today because of the insolvency of the Icelandic bank that was to provide major funding for the transaction. Clearwater units sank 21 cents or 10.5 per cent to $1.79.

The TSX energy sector rose 7.8 per cent as the December crude contract reversed direction to move down 49 cents at US$62.73 a barrel on the New York Mercantile Exchange. EnCana Corp. (TSX: ECA) advanced $4.46 to $55.50 and Suncor Energy Inc. (TSX: SU) moved ahead $2.22 to $25.40.

The financial sector was up 6.55 per cent. Royal Bank rose $2.50 to $45 while Scotiabank (TSX: BNS) advanced $2.36 to $38.68 despite a downgrade to "sell" by an analyst at Dundee Securities.

John Aiken expects further stress on bottom lines on slack revenue from capital markets and increasing credit losses.

In third-quarter earnings reports, Rogers Communications Inc. (TSX: RCI.B) booked an 84 per cent increase in third-quarter net income to $495 million as operating revenue grew 14 per cent from a year ago to $2.98 billion. Rogers shares advanced $2.93 or 10 per cent to $32.

Canadian Pacific Railway Ltd. (TSX: CP) shares were up $6.85 or 15.75 per cent to $50.35 after third-quarter net income dropped 21 per cent to $172.7 million on accounting items but management reported steady operating results and maintained its full-year profit forecast.

Pipeline and power utility operator TransCanada Corp. (TSX: TRP) said its third-quarter earnings bulked up 20 per cent to $390 million. Its shares rose $1.81 to $34.44.

Canadian Tire (TSX: CTC.A) shares rose $1.50 to $43.50 after it said it is planning to open two experimental stores in Ontario that will offer an expanded variety of food and other consumable items as part of a new product assortment.

The positive showing on North American stock exchanges came alongside similar strong advances in Asia following steep losses.

Japan's Nikkei stock average jumped 6.4 per cent and Hong Kong's Hang Seng index surged 14.4 per cent – its biggest gain in 11 years – a day after plunging more than 12 per cent.

On the TSX, advances beat declines 862 to 725 with 215 unchanged as 600 million shares traded worth $6.7 billion.

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